Saturday, January 20, 2007

Corporate Governance Needs Corporate Counsel

The Attorney-General of Singapore, who is patron of the association, spoke at length about role of corporate counsel in relation to corporate governance, and shareholder and investor confidence.

He said he still has not decided whether or not legislation should be introduced to give effect to this.

But he emphasised he was worried about recent corporate scandals in Singapore, and he noted that corporate legal teams in other parts of the world are prioritising such issues.

LESSONS FOR CORPORATE COUNSEL

His lessons for legal teams and organisations that champion good corporate governance are these:

1. There should be a direct reporting line of the legal team to both the Board of Directors and senior management.

2. Legal teams, and not just the company secretary, are responsible for corporate governance and educating Board of Directors about such issues.

3. The legal function extends beyond just legal risk management to include whistleblowing, ethics and compliance.

4. Counsel have a duty to escalate questionable management practices to the Board or, if necessary, to external regulators or other higher responsible authority.

WHAT WAS SHARED

Quoting the American Association of Corporate Counsel, he said, "Chief Legal Officers and their in-house legal teams can and should play a key role in helping management and the Board enact governance reforms that ensure that the company’s ethical culture is supported by a framework of sound systems of compliance. Corporate counsel embrace their professional and fiduciary responsibilities as managers of the legal compliance function, which include reporting allegations “up the ladder” of responsible management to the highest authority necessary to insure that the client can and does remedy legal problems caused by rogue employees or executives. Indeed, lawyers who represent corporations owe their duties to the institution, not to any individual within it; this is a basic tenet of all professional ethics rules."

Then, he drew on the British experience and highlighted some ways how this can be achieved by corporate counsel:

- advise the Board on corporate governance matters and help organise the board and its committees and provide independent advice to them on corporate governance;

- ensure "that the organisation’s contracts and property rights are valid and enforceable, and are enforced, as part of the risk management process";

- manage regulatory risks by identifying, designing and implementing quality procedures to enable good compliance and to deal with issues of non-compliance appropriately;

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Nothing in this blog is meant to substitute professional legal, financial or other advice. Please seek such advice independently! Dharmendra Yadav is presently a corporate counsel in a financial institution. Contact him by e-mail dpyadav {[at]} yahoo.com